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Reading 34: Alternative Investm....olio Management-LOS i

CFA Institute Area 8-11, 13: Asset Valuation
Session 11: Alternative Investments for Portfolio Management
Reading 34: Alternative Investments Portfolio Management
LOS i: Compare and contrast venture capital funds to buyout funds.

In contrast to venture capital funds, buyout funds usually have a:

A)lower level of leverage and earlier and steadier cash flows.
B)
higher level of leverage and earlier and steadier cash flows.
C)lower level of leverage and later and more erratic cash flows.
D)higher level of leverage and later and more erratic cash flows.


Answer and Explanation

Buyout funds are usually investing in later-stage companies where the risks are lower. The cash flows are steadier and the investors can use more leverage.

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In contrast to venture capital funds, buyout funds usually have:

A)less frequent losses and more upside potential.
B)more frequent losses and more upside potential.
C)
less frequent losses and less upside potential.
D)more frequent losses and less upside potential.


Answer and Explanation

These differences are the natural consequence of the buyout funds purchasing entities in later stages of development or even established companies where the risks are lower.

[此贴子已经被作者于2008-9-18 17:16:53编辑过]

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With respect to venture capital (VC) funds and buyout funds, measuring returns accurately is:

A)less difficult with VC funds than with buyout funds.
B)equally difficult with VC funds as it is with buyout funds.
C)
more difficult with VC funds than with buyout funds.
D)not an issue with either VC funds or buyout funds.


Answer and Explanation

The difference is a natural consequence of the buyout funds purchasing entities in later stages of development.

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